HEG delivered 29% EBITDA margin after guiding 20% two months ago
The margin beat is real, but management did not explain why the prior guidance was so far off or whether the improvement is sustainable.
What's new
- Standalone EBITDA of ₹211 cr (29% margin) vs prior guidance of ~20%.
- Sequential turnaround: from ₹126 cr loss in Q4FY26 to ₹211 cr profit in Q1FY27.
- Capacity expansion to 115,000 tons targeted for early 2028.
- TACC anode project to start commercial production in Q1FY28 with ₹600-700 cr first-year revenue.
Themes from the call
Demand
Steel production outside China rose 2.1% in H1 CY26, supporting electrode demand; OECD identifies 71 million tons of new EAF capacity through 2028.
Margins
EBITDA margin improved to 29% from 23% a year ago, driven by better product and geographic mix, cost management and higher realizations; needle coke cost increases are being addressed through pricing.
Capital allocation
Company remains debt-free with ₹858 cr treasury; TACC capex of ₹2,200-2,300 cr is 40% spent, with 70% debt financing from SBI.
Guidance watch
- Management says current ~28-29% EBITDA margins can be maintained.
- Utilization to remain above 90% for the year; FY27 production expected at 90-95%.
- TACC first-year revenue guided at ₹600-700 cr, ramping to ₹1,500-1,600 cr in year three with ~35% EBITDA margin.
- Greentech debt expected at ~₹1,500 cr gross by March 2027.
Risk flags
- EBITDA margin guidance flip without explanation raises credibility concerns.
- Needle coke price increases (₹200-300/ton) will impact costs with a 4-5 month lag; pass-through to customers is not locked.
- Elevated Chinese exports and trade actions (US, EU, India) could pressure pricing.
- Middle East exposure ~20% with some postponements; geopolitical risk remains.
- Demerger timeline dependent on NCLT order; effective date and record date not yet set.
Key quotes
-
"So, the EBITDA range will be the 20% we can say for the next 1st Quarter and 2nd Quarter."
— HEG management, May 2026 call -
"I can only tell you that we will be able to maintain the margins we are currently talking about."
— Ravi Nindhanwala, Chairman MD & CEO, July 2026 call
The brief
HEG's Q1 results hit the market like a surprise. Standalone EBITDA of ₹211 crore yielded a 29% margin, a sharp rebound from last quarter's loss and a full 8-9 percentage points above the 20% margin management had guided for just two months ago. The company attributes the improvement to better realizations, product mix, geographic diversification and cost control. All credible. But neither the magnitude of the beat nor the gap from prior guidance was reconciled. The problem is not the quarter; it is the forecasting. If margins can swing by half without warning, investors have little reason to trust the current guidance of maintaining 28-29%.
The Greentech debt outlook adds another layer. In February management said post-demerger debt would be negligible. Now they say the March 2027 balance sheet will show about ₹1,500 crore of gross debt. The TACC anode project is large and real, but the debt framing has shifted faster than the timeline.
Underneath the noise, the core business is in good shape. The 100,000-ton plant is running above 90% utilization, exports are diversified across 30 countries, and new pricing is starting to flow from competitor increases. The global backdrop — EAF capacity additions outside China, recovering steel production — supports the thesis. But the margin guidance miss and the debt flip introduce a credibility gap that will not be closed by one strong quarter.
Whether the new margin level is sustainable or just a quarter of favorable mix is the open question.